Momentum is facing an inquiry by the elections watchdog over suspicions that it spent more than allowed while campaigning for Jeremy Corbyn.

Investigators from the Electoral Commission will examine whether the influential grouping properly registered money spent in the year leading up to Labour’s unexpectedly strong showing in June’s general election.

It is understood that the commission will examine claims that the leftwing grassroots movement ran up costs for transport, leaflets and offices which were not declared in accordance with electoral law.

Labour could become part of any subsequent inquiry if the party is judged to have known about any excessive spending and failed to register it under its own spending limits.

Momentum has been given much of the credit for the party’s gains in the June election, during which it deployed thousands of activists and volunteers in key marginal seats. It has denied any wrongdoing and says it will comply with the inquiry.

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The commission said it would look at whether Momentum had breached spending limits for an unauthorised, non-party campaigner, and that any contravention risked damaging voters’ confidence in the result of the poll.

It would also examine whether Momentum submitted a return or declaration with inaccurate donation information and whether that return was complete and included all invoices for payments of more than £200.

The commission has launched a spate of recent inquiries following years of criticisms for failing to properly examine election spending. Any breach of electoral rules can result in a fine of up to £20,000. Breaking electoral law can result in a police inquiry and prosecution.

During general elections, strict rules govern the spending and activities of campaigns that are not run by political parties but are intended to influence people to vote a particular way.

In the 12 months leading up to the election, groups can campaign for people to vote for one particular political party – known as “targeted spending” – within certain limits: £31,980 in England, £3,540 in Scotland, £2,400 in Wales, and £1,080 in Northern Ireland.

In November, Momentum said it had spent £38,743 on the general election campaign – just £257.46 below the £39,000 limit.

Senior sources said concerns were raised within Labour’s headquarters during the general election about Momentum’s spending, including whether individual MPs should register travel and accommodation costs for activists.

Momentum was set up by Corbyn’s close ally Jon Lansman, whose associates now control its database. It has more than 23,000 members, 150 local groups and 200,000 supporters.

According to commission records, the registered “responsible person” who would have to ensure that the group would pay any future fines is Puru Miah, an activist from Tower Hamlets.

In a statement on Thursday, the commission said it was possible that contraventions or offences of a different nature could be found during the investigation.

Bob Posner, the commission’s director of political finance and regulation, called Momentum a “high-profile campaigning body” during the June election.

“Questions over their compliance with the campaign finance rules at June’s general election risk causing harm to voters’ confidence in elections,” he said. “There is significant public interest in us investigating Momentum to establish the facts in this matter and whether there have been any offences.

“Once complete, the commission will decide whether any breaches have occurred and, if so, what further action may be appropriate, in line with its enforcement policy.”

Campaigning organisations may be allowed to spend more than the legal limit but need the authorisation of the party they are campaigning to elect. If a party gives permission, the campaign can use extra funds but that will count towards that political party’s own legal spending limit.

A Momentum spokesperson said much of the investigation referred to “administrative errors that can be easily rectified”.

“Momentum put a lot of effort and resources into detailed budgeting and financial procedures during the election to ensure full compliance,” the spokesman said. “Our election campaign was delivered on a low budget because it tapped into the energy and enthusiasm of tens of thousands of volunteers across the country.

“We have a good working relationship with the Electoral Commission, and will fully comply with the investigation going forward.”

Sources at Momentum said they believed there was a fundamental misunderstanding of how they had operated: “We believe the Electoral Commission is investigating Momentum because we managed to do so much with so little and because they haven’t previously dealt before with a social movement-type organisation that is powered by the energy and enthusiasm of tens of thousands of volunteers rather than large amounts of money.”

The source pointed to money spent on member-only trainings, texts and emails to Momentum members, which were not declared because the group said it was not aimed at the general public.

A Labour source said there were no formal links with Momentum which ran an entirely separate campaign.

All political parties and campaigns have come under commission scrutiny in recent years. Labour was fined £20,000 for undeclared spending in the 2015 election, including on the infamous “Ed Stone” which laid out the campaign pledges of the then Labour leader, Ed Miliband.

The Conservatives were fined a record £70,000 for “significant failures” in reporting its campaign spending from 2015.